The share of skilled workers in urban populations has steadily
increased since 1970 in US metropolitan areas, but more in some cities
than in others. A higher concentration of skills is a sought after asset for
cities as it affects population growth positively, also when the initial share
is instrumented for by using land-grant colleges. However, skilled cities
may attract more skilled workers, but not because they are more skilled
initially: increasing returns are rejected when controlling for fixed effects
and bias due to inclusion of a lagged dependent variable. Several amenities
such as a low-skilled personal service sector do affect the concentration of
skills positively. Although firms seem to benefit from externalities, there is
no convincing case for an effect on the concentration of college graduates
in a city.